OLD GREENWICH, Conn. - Star Equity Holdings, Inc. (NASDAQ: STRR; STRRP), a diversified holding company, has announced the completion of its acquisition of Timber Technologies, LLC, a manufacturer of engineered wood products based in Wisconsin. The transaction, which finalized on May 17, 2024, signals Star Equity's entry into the engineered wood products market.
The acquisition was structured as a cash-free, debt-free purchase, totaling $23 million. This sum includes $16 million paid upfront in cash, $4 million in deferred cash, and a $3 million earn-out payable over two years, half in cash and half in shares of STRRP preferred stock. The earn-out is contingent on Timber Technologies achieving adjusted EBITDA targets of $5.4 million and $6.0 million for the first and second years, respectively.
In addition to the acquisition, Star Equity will separately purchase associated real estate for $3 million, expected to close in June 2024. To finance the acquisition, Star secured a $7 million term loan from Bridgewater Bank with a fixed interest rate of 7.85%, amortizing over five years.
Timber Technologies, founded in 2003, specializes in glue-laminated timber products for various sectors, including agriculture, infrastructure, and residential and commercial building construction. The company's products are known for their strength, durability, and environmental sustainability, offering an alternative to traditional building materials like steel, concrete, and aluminum.
Rick Coleman, CEO of Star, expressed confidence in the acquisition, highlighting Timber Technologies' consistent profitability and strong cash generation. For the full year 2023, Timber Technologies reported unaudited revenue of $18.8 million and adjusted EBITDA of $5.5 million.
The current co-owners/operators of Timber Technologies, Tom Niska and Dale Schiferl, will remain with the business, maintaining their existing roles. They expressed enthusiasm for the partnership with Star Equity, citing the company's extensive experience in the construction space as beneficial for future growth.
Jeff Eberwein, Executive Chairman of Star, noted the strategic nature of the acquisition, which replaces the recently sold Digirad Health with a business that has comparable EBITDA but stronger growth prospects and cash flow.
This acquisition is part of Star Equity's broader growth strategy, aimed at expanding its Building Solutions division and pursuing further growth through acquisitions and organic development. The transaction details were advised by The Peakstone Group, serving as the exclusive M&A advisor to Timber Technologies.
The information in this article is based on a press release statement from Star Equity Holdings, Inc.
InvestingPro Insights
In light of Star Equity Holdings' recent acquisition of Timber Technologies, it is pertinent to consider the company's financial health and market position. According to InvestingPro data, Star Equity Holdings holds a market capitalization of $13.94 million USD. Despite a challenging revenue growth rate in the last twelve months as of Q1 2023, with a decline of nearly 19.88%, the company boasts a strong gross profit margin of 26.05%. This suggests that while top-line growth may be under pressure, the firm is efficient in managing its cost of goods sold.
Furthermore, Star Equity Holdings' price/book ratio as of Q1 2023 stands at a modest 0.3, indicating that the stock may be undervalued relative to the company's book value. This could be of interest to value-oriented investors seeking assets that trade below their intrinsic worth. The company's cash position is also notable, as one of the InvestingPro Tips highlights that Star Equity Holdings holds more cash than debt on its balance sheet, which is a positive sign of financial stability. Additionally, the firm is characterized by low price volatility, which might appeal to investors looking for less risky equity exposure.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available, which further explore the company's financial nuances. For instance, Star Equity Holdings is currently trading at a low revenue valuation multiple, and its liquid assets exceed short-term obligations, suggesting a robust short-term financial footing. Still, it is important to note that the company has not been profitable over the last twelve months and does not pay a dividend to shareholders, which could be a consideration for income-focused investors.
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